Shares of Southwest Airlines Co. (LUV) reached a fresh 52-week high of $30.92 yesterday, reflecting a solid return of more than 133% in the past 12 months.
Ever since the company announced better-than expected second-quarter results, shares have jumped more than 7%.
So far this year the stock has moved up more than 62%, driven by robust financial numbers. Southwest Airlines has delivered positive earnings surprises in all of the last four quarters, with an average earnings beat of 12.8%, including a positive surprise of 14.75% in the last concluded quarter. Moreover, the company’s expected long-term earnings growth rate of 25.2% also makes the stock look attractive.
Strong Earnings and Revenues
Second quarter earnings of 70 cents per share surpassed the Zacks Consensus Estimate of 61 cents by 14.75 %. The results were also considerably higher than the prior-year quarter earnings of 38 cents. This marks the carrier’s fifth consecutive quarter of record profits, achieved on the back of successful execution of its strategic initiatives.
Quarterly revenues moved up 7.9% year over year to $5,011 million, ahead of the Zacks Consensus Estimate of $4,932 million. On a year-over-year basis, Passenger and Freight revenues increased 8.5% and 2.3% respectively, while Other revenues fell 2.3%.
Robust Traffic Numbers
The company recorded a healthy rise in traffic for July 2014. The month’s traffic – measured in revenue passenger miles (RPMs) – came in at 10.6 billion, up 6.6% from almost 10 billion recorded in the comparable period a year ago.
In the first seven months of 2014, Southwest Airlines generated RPMs of 63.4 billion (up 2.8% year over year) and available seat miles (ASMs) of 76.8 billion (down 0.2%), leading to a load factor of 82.5% (up 240 bps).
Other Stocks to Consider
Southwest Airlines currently has a Zacks Rank #1 (Strong Buy). Some other airline stocks which warrant a look are Republic Airways Holdings Inc. (RJET), Spirit Airlines, Inc. (SAVE) and United Continental Holdings, Inc. (UAL). All these stocks sport a similar Zacks Rank #1.
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